nep-sbm New Economics Papers
on Small Business Management
Issue of 2021‒05‒10
thirteen papers chosen by
João Carlos Correia Leitão
Universidade da Beira Interior

  1. The effects of publicly supported environmental innovations on firm growth in the European Union By Florian Flachenecker; Martin Kornejew; Mario Lorenzo Janiri
  2. A Scientific Approach to Innovation Management: Evidence from Four Field Experiments By Camuffo, Arnaldo; Gambardella, Alfonso; Messinese, Danilo; Novelli, Elena; Paolucci, Emilio; Spina, Chiara
  3. On Immigration and Native Entrepreneurship By Duleep, Harriet Orcutt; Jaeger, David A.; McHenry, Peter
  4. Exploring Synergies between EU Cohesion Policy and Horizon 2020 Funding across European Regions: An analysis of regional funding concentration on key enabling technologies and societal grand challenges By Julia Bachtroegler-Unger; Mathieu Doussineau
  5. May AI Revolution Be Labour-Friendly? Some Micro Evidence from the Supply Side By Damioli, Giacomo; Van Roy, Vincent; Vertesy, Daniel; Vivarelli, Marco
  6. Firms, Kinship and Economic Growth in the Kyrgyz Republic By Castaneda Dower, Paul; Gerber, Theodore; Weber, Shlomo
  7. Repeated collaboration of inventors across European regions By Gergõ Tóth; Zoltán Elekes; Sándor Juhász; Balázs Lengyel
  8. Higher Education for Smart Specialisation: The Case of Eastern Macedonia and Thrace By Yannis Tolias; Eskarne Arregui-Pabollet
  9. The Impact of Regulation on Innovation By Aghion, Philippe; Bergeaud, Antonin; Van Reenen, John
  10. The Smart Specialisation Policy Experience: Perspective of National and Regional Authorities By Fatime Barbara Hegyi; Fabrizio Guzzo; Inmaculada Perianez Forte; Carlo Gianelle
  11. High-speed Rail and the Spatial Distribution of Economic Activity: Evidence from Japan's Shinkansen By Hayakawa, Kazunobu; Koster, Hans R.A.; Tabuchi, Takatoshi; Thisse, Jacques-François
  12. Surviving the Fintech Disruption By Wei Jiang; Yuehua Tang; Rachel (Jiqiu) Xiao; Vincent Yao
  13. Institutions and the Productivity Challenge for European Regions By Ganau, Roberto; Rodríguez-Pose, Andrés

  1. By: Florian Flachenecker (European Commission, Joint Research Centre, Brussels, Belgium); Martin Kornejew (University of Bonn, Bonn, Germany); Mario Lorenzo Janiri (European Commission, Joint Research Centre, Brussels, Belgium)
    Abstract: Enabling innovations with environmental benefits is considered crucial to align economic and environmental objectives. We estimate the economic effects of publicly supported environmental innovations for the business economy of 13 Member States of the European Union. Using an instrumental variable approach to address the inherent endogeneity problem, we find that the average publicly supported environmental innovation increases firm employment by 9%, turnover by 12% and market share by 12% over a two-year period. Notwithstanding country and sector heterogeneity, essentially all countries and sectors show positive effects. Moreover, the results are not driven by highly innovative firms but are based on small and medium-sized enterprises with limited innovation activity. Thus, this paper provides robust evidence that public financial support for environmental innovations can align economic and environmental objectives for a broad set of firms, sectors and countries. Public policy supporting environmental innovations might therefore facilitate the recovery and transition to a more sustainable economy.
    Keywords: eco-innovation; environmental innovation; competitiveness; firm growth; European Union
    JEL: C26 O31 O44 Q32 Q56
    Date: 2021–06
  2. By: Camuffo, Arnaldo; Gambardella, Alfonso; Messinese, Danilo; Novelli, Elena; Paolucci, Emilio; Spina, Chiara
    Abstract: Our model shows that managers and entrepreneurs make better decisions under uncertainty if they adopt a scientific approach in which they formulate and test theories. The model predicts that they are more likely to terminate projects with negative returns, commit to projects with positive returns, or pivot to projects with higher returns. We test these implications by combining the results of four Randomized Control Trials (RCTs) involving 754 start-ups and small-medium enterprises and 10,730 data points over time. The empirical analysis corroborates the predictions of the model.
    Keywords: field experiments; Management Practices; Scientific entrepreneurship; strategic decision-making; uncertainty
    JEL: L21 L26 M13 M21
    Date: 2021–03
  3. By: Duleep, Harriet Orcutt; Jaeger, David A.; McHenry, Peter
    Abstract: We present a novel theory that immigrants facilitate innovation and entrepreneurship by being willing and able to invest in new skills. Immigrants whose human capital is not immediately transferable to the host country face lower opportunity costs of investing in new skills or methods and will be more flexible in their human capital investments than observationally equivalent natives. Areas with large numbers of immigrants may therefore lead to more entrepreneurship and innovation, even among natives. We provide empirical evidence from the United States that is consistent with the theory's predictions.
    Keywords: entrepreneurship; Human Capital; Immigration; Innovation
    JEL: J15 J24 J39 J61 L26
    Date: 2021–03
  4. By: Julia Bachtroegler-Unger (Österreichisches Institut für Wirtschaftsforschung (WIFO),Vienna, Austria); Mathieu Doussineau (European Commission - JRC)
    Abstract: Over the course of the 2014-2020 period, the European Union has invested more than €125bn into support to research and innovation through two main channels: the excellence-based Horizon 2020 programme and its cohesion policy implemented through the European Structural and investment funds (ESIF) and in particular the European Regional Development fund (ERDF). While projects funded by ESIF are selected in the context of place-based operational programmes and smart specialisation strategies (S3), Horizon 2020 grants are assigned based on the quality of the project proposals and consortia without any geographical criteria. A concentration of R&I funding from both funding schemes in the same technological or policy area could point to the creation of a synergy between EU funding as suggested by the concept of smart specialisation and encouraged by the European Commission. This report uses project data to analyse the regional distribution of Horizon 2020 and ESIF funding among key enabling technologies and societal grand challenges and to map potential synergies between different EU funding policies.
    Keywords: ERDF, ESIF, Cohesion policies, database, Horizon 2020
    JEL: O30 O38 O32
    Date: 2021–04
  5. By: Damioli, Giacomo (ISER, University of Essex); Van Roy, Vincent (European Commission, Joint Research Centre); Vertesy, Daniel (European Commission, Joint Research Centre); Vivarelli, Marco (Università Cattolica del Sacro Cuore)
    Abstract: This study investigates the possible job-creation impact of AI technologies, focusing on the supply side, namely the providers of the new knowledge base. The empirical analysis is based on a worldwide longitudinal dataset of 3,500 front-runner companies that patented the relevant technologies over the period 2000-2016. Obtained from GMM-SYS estimates, our results show a positive and significant impact of AI patent families on employment, supporting the labour-friendly nature of product innovation in the AI supply industries. However, this effect is small in magnitude and limited to service sectors and younger firms, which are the leading actors of the AI revolution. Finally, some evidence of increasing returns seems to emerge; indeed, the innovative companies which are more focused on AI technologies are those obtaining the larger impacts in terms of job creation.
    Keywords: innovation, technological change, patents, employment, job-creation
    JEL: O33
    Date: 2021–04
  6. By: Castaneda Dower, Paul; Gerber, Theodore; Weber, Shlomo
    Abstract: This paper addresses whether kinship networks promote or impede entrepreneurship in the Kyrgyz Republic. We conducted a survey of firm managers/entrepreneurs about their business networks, resources they receive from and provide to their contacts, their firm's performance, and the business environment they face. Our data indicate that receiving help from kin connections increases profitability, while providing help to kin decreases it. While kin-reliant firms grow slower than firms with a lower degree of kin assistance, the former grow faster than firms that do not have access to business networks. In addition, kin connections and firm performance are unrelated for firms that have adopted best business practices. Our results demonstrate that directly measuring both receipt and provision of help from/to kin helps resolve the ambiguity of findings in the broader literature regarding the net effects of kin networks on firm performance: the two forms of network use are positively correlated, yet have opposite effects.
    Keywords: firm performance; Kinship networks; Kyrgyz Republic
    JEL: O12 O14 O17 P23 Z13
    Date: 2021–02
  7. By: Gergõ Tóth (Agglomeration and Social Networks Lendület Research Group, Centre for Economic-and Regional Studies, Budapest, Hungary and Spatial Dynamics Lab, University College Dublin, Dublin, Ireland); Zoltán Elekes (Agglomeration and Social Networks Research Group, Centre for Economic and Regional Studiesand Centre for Regional Science at Umea University (CERUM), Umea University, 90187 Umea, Sweden); Sándor Juhász (NETI Lab, Corvinus Institute for Advanced Studies, Budapest Corvinus University, Budapest, Hungary); Balázs Lengyel (Agglomeration and Social Networks Lendület Research Group, Centre for Economic-and Regional Studies, Budapest, Hungary;International Business School Budapest, Budapest, Hungaryand NETI Lab, Corvinus Institute for Advanced Studies, Budapest Corvinus University, Budapest, Hungary)
    Abstract: This paper explores the spatial patterns and underlying determinants of repeated inventor collaboration across European NUTS 3 regions. It is found that only a small fraction of co-inventor linkages across regions are repeated, while community detection reveals that these collaborations are clustered in geographical space more intensively compared with collaboration in general. Additional results from gravity modelling indicate that links in the inter-regional co-patenting network emerge mainly through the triadic collaboration of regions, while geographical proximity becomes the most influential factor for repeating co-inventor ties. In addition to that, the combination of technological similarity and shared third partner regions offer a premium for the likelihood of repeating collaboration, but only when geographical proximity is present as an enabler.
    Keywords: collaborative knowledge production; inter-regional collaboration; co-inventor network; repeated collaboration; European Research Area; gravity model
    JEL: D85 O31 O43 O52 R11 R58
    Date: 2021–03
  8. By: Yannis Tolias (Innovatia Systems); Eskarne Arregui-Pabollet (European Commission - JRC)
    Abstract: This technical report presents the findings of the case study carried out in Eastern Macedonia and Thrace on the role of Higher Education Institutions (HEIs) in the design and implementation of the Smart Specialisation Strategy (RIS3). It is one of the case studies undertaken in the project Higher Education for Smart Specialisation (HESS), an initiative of the European Commission's Joint Research Centre (JRC) and the Directorate General for Education, Youth, Sport and Culture. The region is a moderate innovator according to the 2019 Regional Innovation Scoreboard, with important structural weaknesses constrained by horizontal development policies, suffering from its remoteness which affects to its ability to attract and retain talent. It has a comprehensive higher education system, with the Democritus University of Thrace as main regional higher education institution and eleven campuses spread across the Region. The Smart Specialisation Strategy is considered by stakeholders the best available tool to develop a long-term, evidence and place-based regional innovation strategy. The regional and national governance structures and their interaction, as well as the policy mix deployed for the programming period 2014-2020, has limited the capacity of higher education to contribute to regional growth. The partnership between regional administration and HEIs manager seems to have room for improvement, through spaces for dialogue and the co-design of funding instruments that respond to a shared vision of regional challenges. The institutionalisation of HEI third mission could benefit from a performance based type system, as well as the promotion of HEI leadership in a region characterise by a strong disconnect. The new programming period 2021-2027 is an excellent opportunity to strengthen the ambition of the higher education institutions to lead the regional transformation process, through adequately tailored funding instruments and improved peer learning capacity from good practices at EU level.
    Keywords: Smart specialisation strategies, higher education institutions, universities, territorial development, research and innovation, Greece
    Date: 2021–05
  9. By: Aghion, Philippe; Bergeaud, Antonin; Van Reenen, John
    Abstract: Does regulation affect the pace and nature of innovation and if so, by how much? We build a tractable and quantifiable endogenous growth model with size-contingent regulations. We apply this to population administrative firm panel data from France, where many labor regulations apply to firms with 50 or more employees. Nonparametrically, we find that there is a sharp fall in the fraction of innovating firms just to the left of the regulatory threshold. Further, a dynamic analysis shows a sharp reduction in the firm's innovation response to exogenous demand shocks for firms just below the regulatory threshold. We then quantitatively fit the parameters of the model to the data, finding that innovation at the macro level is about 5.4% lower due to the regulation, a 2.2% consumption equivalent welfare loss. Four-fifths of this loss is due to lower innovation intensity per firm rather than just a misallocation towards smaller firms and lower entry. We generalize the theory to allow for changes in the direction of R&D, and find that regulation's negative effects only matter for incremental innovation (as measured by citations and text-based measures of novelty). A more regulated economy may have less innovation, but when firms do innovate they tend to "swing for the fence" with more radical (and labor saving) breakthroughs.
    Keywords: firm size; Innovation; patents; Regulation
    JEL: J8 L11 L25 L51 O31
    Date: 2021–01
  10. By: Fatime Barbara Hegyi (European Commission - JRC); Fabrizio Guzzo (European Commission - JRC); Inmaculada Perianez Forte (European Commission - JRC); Carlo Gianelle (European Commission - JRC)
    Abstract: This publication presents the results of a survey, launched in 2020 as part of a research project performed by the Smart Specialisation platform to gain new insights on the Smart Specialisation (S3) policy experience across the European Union (EU). The survey aimed at gathering the views and reflections of S3 implementing authorities on their policy experience. The questionnaire addressed the main tenets of the Smart Specialisation policy concept and consisted of four sections: implementation, governance, Entrepreneurial Discovery Process (EDP) and monitoring and evaluation. Survey results provides evidence on the state of implementation, challenges and critical aspects as well as some of the results achieved by this policy experiment in view of the new Cohesion Policy 2021-2027. Overall, we can observe that most strategies are implemented according to the original plans. Nevertheless, the situation varies considerably across categories of territories, with less developed regions exhibiting a poorer implementation performance. Smart Specialisation has supported the adoption and diffusion of more inclusive forms of governance in innovation policy across the EU. Despite the general increase in pressure for coordination and the changes introduced by this policy experiment, the effectiveness of inter-government coordination mechanisms is still considered weak by many national and regional authorities. Clearly, there is room for further improvements in this area. More efforts are also needed in relation to the skills and resources to perform the policy functions of the management body. Overall, the quality of the contribution of different stakeholders to the entrepreneurial discovery process is considered adequate by the public authorities responsible for the management of the strategy. Relevant partners are considered to have high technical/specialist skills, while their capacities to participate in policy decision-making processes are generally lower. In person meetings are the preferred options to engage stakeholders. This is not surprising, given the potential these meetings offer for deeper interaction. Online platforms appear less popular. However, considered the accelerated learning on virtual forms of engagement that is taking place with the COVID-19 pandemic, the perception on the use of online platforms is likely to change. Finally, survey results show that most of the strategies have a system of result indicators in place. However, the capacity of these indicators to monitor strategy progress is often inadequate. Lack of adequate and timely data is another major critical issue of the S3 monitoring systems, while the integration of the findings of the monitoring and evaluation systems into the next programming period is present in just over 40% of the cases.
    Keywords: Smart Specialisation, monitoring, evaluation, assessment, policy implementation, policy evaluation, governance, entrepreneurial discovery process, leadership
    Date: 2021–04
  11. By: Hayakawa, Kazunobu; Koster, Hans R.A.; Tabuchi, Takatoshi; Thisse, Jacques-François
    Abstract: We investigate the effects of high-speed rail (HSR) on the location of economic activity. We set up a spatial quantitative general equilibrium model that incorporates spatial linkages between firms (including manufacturing and services), agglomeration economies, as well as commuting and migration. The model is estimated for Japan in order to investigate the impacts of the Shinkansen, i.e., the first HSR ever built. We show that traveling by train strengthens firms' linkages, but is less important for commuting interactions. The Shinkansen increases welfare by about 5%. We show that extensions of the Shinkansen network may have large effects (up to a 30% increase in employment) on connected municipalities, although the effects are smaller for places with higher fixed costs. Our counterfactuals show that, without the Shinkansen, Tokyo and Osaka would be 6.3% and 4.4% larger, respectively.
    Keywords: agglomeration; commuting; employment; high-speed rail; Population
    JEL: D04 H43 R42
    Date: 2021–02
  12. By: Wei Jiang; Yuehua Tang; Rachel (Jiqiu) Xiao; Vincent Yao
    Abstract: This paper studies how demand for labor reacts to financial technology (fintech) shocks based on comprehensive databases of fintech patents and firm job postings in the U.S. during the past decade. We first develop a measure of fintech exposure at the occupation level by intersecting the textual information in job task descriptions and fintech patents. We then document a significant decline of job postings in the most exposed occupations, and an increase in industry as well as geographical concentration of these occupations. Firms resort to an upskilling strategy in face of the fintech disruption, requiring “combo” (finance and software) skills, higher education attainments, and longer work experiences in the hiring of fintech-exposed jobs. Financial firms and those with high innovation outputs are able to offset the disruptive effect from the fintech shock. Among innovating firms, however, only inventors (but not acquisition-driven innovators) experience growth in hiring, sales, investment, and enjoy better returns on assets.
    JEL: G30 J23 O33
    Date: 2021–04
  13. By: Ganau, Roberto; Rodríguez-Pose, Andrés
    Abstract: Europe has witnessed a considerable labour productivity slowdown in recent decades. Many potential explanations have been proposed to address this productivity 'puzzle'. However, how the quality of local institutions influences labour productivity has been overlooked by the literature. This paper addresses this gap by evaluating how institutional quality affects labour productivity growth and, particularly, its determinants at the regional level during the period 2003-2015. The results indicate that institutional quality influences regions' labour productivity growth both directly -as improvements in institutional quality drive productivity growth- and indirectly -as the short- and long-run returns of human capital and innovation on labour productivity growth are affected by regional variations in institutional quality.
    Keywords: Europe; Human Capital; Innovation; institutional quality; labour productivity; Physical Capital; regions
    JEL: E24 J24 O47 R11
    Date: 2021–03

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